Finance Minister Brian Lenihan has announced further pay cuts for the Taoiseach, Tánaiste and ministers, with the Taoiseach's salary being cut by €14,000 a year. Ministers face a pay cut of €10,000 a year.

Mr Lenihan said this brought the total cut in the Taoiseach's gross pay to more than €90,000, with cuts of more than €60,000 for ministers.

He also said the Government believed there should be a maximum salary rate of €250,000 in the public sector, including in State agencies.

The Minister said there were issues about the contracts of those currently in those posts, but the position of Minister for Finance as a shareholder could be used to enforce the maximum salary 'within a reasonable timeframe'.

A 10% cut in the pay of new entrants to the public service announced in the four-year plan will be applied to those appointed to the judiciary in 2011. A reduced salary of €250,000 will also apply to the next President.

The Minister said the cost of public service pensions had increased to €2.2 billion in the past four years, adding that public service pensioners had so far been unaffected by cut imposed on existing public service staff. He said it was unfair if highly-paid pensioners remained unaffected, while public service workers on low pay took cuts.

As a result, he said, public service pensions above €12,000 a year would be cut by an average of 4%. He said those on higher pensions would pay most, and the cut would apply to former political office holders and retired members of the judiciary. The cuts range from 6% for those between €12,000 and €24,000 to 12% for pensions above €60,000.

The Minister said a grace period, under which previous salary levels were used to calculate pensions, had been due to expire at the end of 2011. This is being extended by two months, but those retiring during the grace period will still face the reductions announced today.

A new single pension scheme for new public service entrants will come into effect in 2011, with pensions based on career average earnings rather than final pay. Post-retirement rises will be based on inflation rather than pay.

State car costs to be reduced

The cost of State cars is to be reduced by a third over the next two years through a number of measures.

Car usage by former Taoisigh and Presidents and other former office holders will be pooled, while the number of Gardaí assigned to driving duties will be reduced.

The engine size of State cars will be gradually reduced to two litres or less as cars in the fleet are replaced. The Budget document says cars in the existing fleet have not been replaced in recent years.

Meanwhile, the Government has no plans to replace the Gulfstream jet, which it says is at the end of its operational lifespan. The smaller remaining Lear jet will continue to be used by ministers travelling to Europe on government business.